Weekly Roberts Market Report

US - Dollar-denominated grains have become more competitive in global markets as a result of a weaker US dollar, writes Michael T. Roberts in his Weekly Roberts Agricultural Commodity Market Report for 29 November.
calendar icon 1 December 2011
clock icon 4 minute read

LEAN HOGS on the CME closed down on Monday pressured by profit taking and higher corn futures. The DEC’11LH contract closed at $87.550/cwt; down $0.750/cwt. MAY’12LH futures closed at $99.100/cwt; down $0.500/cwt.

Traders logged good profits after front months touched four week highs. Speculators have been moving in the opposite direction of corn futures for a while now as traders play corn/lean hog spread.

Cash hogs were mostly steady on buying interest main for delivery near the end of the week. Some packers were reported to be pulling ahead in the slaughter process to fill gaps from recent high line rates.

Reports indicate expectations are high for steady-to-firm cash prices coming off the traditional Thanksgiving slump. Traders are thinking export sales will not be as brisk over the next 8 weeks and could weigh on futures. USDA put the wholesale pork price at $89.77/cwt; up $0.38/cwt.

According to HedgersEdge.com, the average packer margin was placed at a positive $8.45/head based on the average buy of $61.48/cwt vs. the average breakeven of $64.55/cwt. The CME lean hog index for Monday, 11/28/11 was placed at $83.82; up $0.31.

CORN futures on the Chicago Board of Trade (CBOT) finished up on Monday. The DEC’11 contract closed at $5.916/bu; up 9.25¢/bu. MAR’12 futures closed at $5.984/bu; up 8.5¢/bu. The DEC’12 contract closed up 10.0¢/bu at $5.454/bu.

Corn futures were supported by Friday’s buying opportunity amid a falling US dollar as the Euro Zone debt crisis continues. A weaker US dollar makes dollar-denominated grains more competitive in global markets.

Floor sources said they hoped demand for US corn would renew. Corn exports were viewed as somewhat bullish with USDA putting corn-inspected-for-export at 30.596 mi bu vs. estimates for 27-31 mi bu.

On Monday France’s Supreme Court over ruled a ban on GMO corn developed by Monsanto wrong and ordered the ban immediately lifted. Funds were active buyers purchasing 9,000 lots.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday on rising open interest. JAN’11 soybean futures closed 14.5¢/bu higher at $11.210/bu. The MAR’12 contract closed at $11.310/bu; up 15.25¢/bu. NOV’12 futures closed at $11.360/bu; up 16.5¢/bu.

Soybean futures rebounded from last week’s slide to lows not seen in over 12 months on news that the Euro zone could be nearing a solution to its sovereign-debt crisis. The falling US dollar was supportive. CBOT soybeans are near oversold. Good weather in most of South America, except for Brazil, held prices in check.

Exports were near bearish with USDA putting soybeans-inspected-for-export at 41.406 mi bu vs. estimates for 40-45 mi bu. Reports indicate that China is stockpiling soybeans from internal farming sources to last until the end of April 2012.

Funds were net buyers of over 4,000 lots while noncommercial traders cut 13,093 long contracts and added 4,449 shorts, leaving them net short, 23,522 contracts. Money managers beefed up bearish bets on US agricultural commodities last week on sagging prices and concerns that the global economy was weakening. However, Monday showed renewed buying activity on oversold opportunities.

WHEAT futures in Chicago (CBOT) closed up on Monday on a mild run of short covering. The DEC’11 contract closed at $5.746/bu; up 0.25¢/bu. JULY’12 wheat futures finished at $6.222/bu; up 4.5¢/bu. Wheat futures were also supported by a weaker dollar and a rallying stock market.

Exports were neutral with USDA putting wheat-inspected-for-export at 15.392 mi bu vs. estimates for 14-18 mi bu. Sluggish global demand for US wheat weighed on futures. Additionally, wheat fundamentals remain sluggish as world markets are expected to continue taking sales away from US suppliers.

Funds bought net 1,000 CBOT wheat lots but large speculator added 9,420 short contracts while getting out of 2,444 long contracts leaving them net-short 86,620 lots.

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